While none of the following analysis suggests that a market crash is imminent, it does imply that we are very late in the current market and economic cycle. A market melt up into 2015 would certainly be exciting, but should be used to sell overly priced assets to what will probably be a dwindling supply of "greater fools."
First it was humans. Now it is vaccum tubes.
- Shale operaters Goodrich, Oasis Petroleum cut spending for 2015 as oil slides (Reuters)
- Greece to hold elections in January if president vote fails (Reuters)
- Norway’s Shock Rate Cut Drives Krone to Lowest Since 2009 (BBG)
- ‘Severe Downturn’ Threatening Norway, Central Bank Governor Says (BBG)
- Russia’s Fifth Rate Increase Fails to Halt Ruble Slide to Record (BBG)
- SNB Says Deflation Risks Increased as Franc Cap Maintained (BBG)
- China eases bank lending restrictions, PBOC targets 10 trillion yuan in loans for 2014 (Reuters)
- Mobius Says China’s Bull Market Is Just Getting Started (BBG)
- How Wal-Mart Made Its Crumbling China Business Look So Good for So Long (BBG)
Not quite as many fireworks overnight, in another session dominated by central banks. First it was revealed that China had injected CNY400 billion into the banking system to add liquidity as the economy slows, which is ironic because on the other hand China is also seemingly doing everything in its power to crash its nascent stock market bubble mania, following the latest news that China’s CSRC approved 12 IPOs ahead of schedule which is seen as a pre-emptive step to tighten interbank liquidity amid the recent rise in margin trading. Another central bank that was busy overnight was Russia's, which proceeded with its 5th rate hike of the year, pushing the central rate up by 100 bps to 10.50% as expected. Elsewhere, the Bank of England wants to move to a Fed-style decision schedule and start releasing immediate minutes as Governor Mark Carney overhauls the framework set up more than 17 years ago. The Swiss National Bank predicted consumer prices will drop next year and said the risk of deflation has increased as it vowed to defend its cap on the franc. Finally Norway’s central bank cut its main interest rate for the first time in more than two years and signaled it may ease again next year as plunging oil prices threaten growth in western Europe’s biggest crude exporter.
Are much lower oil prices good news for the U.S. economy? Only if you like collapsing capital expenditures, rising unemployment and a potential financial implosion on Wall Street.
- New Normal headlines: Global stocks up on hopes of China policy easing (Reuters)
- China inflation eases to five-year low (BBC)
- U.S. Lawmakers Agree on $1.1 Trillion Spending Bill (WSJ)
- U.S. Braced for Blowback as CIA Report Lays Bare Abuses (BBG)
- CIA tortured, misled, U.S. report finds, drawing calls for action (Reuters)
- CIA Made False Claims Torture Prevented Heathrow Attacks (BBG)
- Oil Resumes Drop as Iran Sees $40 If There’s OPEC Discord (BBG)
- OPEC Says 2015 Demand for Its Crude Will Be Weakest in 12 Years (BBG)
- Greek yield curve inverted as politics raise default fears (Reuters)
Deutsche Bank Is Stumped: The Broad Market Is Ignoring The Bear Market In Energy, "Something Has To Give"Submitted by Tyler Durden on 12/09/2014 17:33 -0500
First the BIS came out with the following stunner when discussing markets: "The highly abnormal is becoming uncomfortably normal. Central banks and markets have been pushing benchmark sovereign yields to extraordinary lows - unimaginable just a few years back. There is something vaguely troubling when the unthinkable becomes routine." And now the routine of the unthinkable has forced Deutsche Bank to look at the unprecedented disconnect between the collapse in energy assets and the general market - which continues its hypnotized, low-volume levitation - and conclude that it makes absolutely no sense: "We find current dislocation between deep distress in Energy assets and marginal reaction in broad market indexes to be inconsistent with each other. Either energy has to rebound noticeably, or it could pull broader market indexes lower. Exceptions to this assessment are rare."
Europe's banks are vulnerable in 2015 due to weak macroeconomic conditions, unfinished regulatory hurdles and the risk of bail-ins according to credit rating agencies ... Oh what a tangled web, we weave ...
- China’s Stocks Sink Most Since 2009 as Turnover Jumps to Record (BBG)
- Greek Stocks, Bonds Tumble (WSJ)
- China tightens LGFV funding screws (BBG)
- Crude Rebounds From Five-Year Low Amid Shale-Oil Spending Curbs (BBG)
- Sexual threats, other CIA methods detailed in Senate report (Reuters)
- U.S. Takes Security Precautions Overseas Ahead of CIA Report (WSJ)
- Light-Speed Treasury Trading Governed by Rules Dating to 1998 (BBG)
- Delhi to ban all internet taxi firms after Uber rape claim (Reuters)
- Supreme Group Fined $389 Million for Overcharging Pentagon (WSJ)
Back in June, the world was speechless when Goldman's head of the ECB, Mario Draghi, stunned the world when he took Bernanke's ZIRP and raised him one better by announcing the ECB would send deposit rates into negative territory, in the process launching the Neutron bomb known as N(egative)IRP and pushing European monetary policy into the "twilight zone", forcing savers to pay (!) for the privilege of keeping the product of their labor in the form of fiat currency instead of invested in a global ponzi scheme built on capital market so broken even the BIS can no longer contain its shocked amazement. Well, the US economy may be "decoupling" (just as it did right before Lehman) and one pundit after another are once again (incorrectly) predicting that the Fed may raise rates, but when it comes to the true "value" of money, US banks have just shown that when it comes to spread between reality and the economic outlook, the schism has never been deeper.
Enter US NIRP.
The S&P 500 Energy sector stocks are down over 12% year-to-date, tumbling over 3% today to fresh 20-month lows. The spread (or risk) of high-yield energy credits surged again today, breaking above 850bps for the first time... The overall high-yield credit market is being dragged wider by this contagion as hedgers try to contain the collapse that is possible. For now, the S&P 500 remains entirely ignorant of the fact that over a third of its CapEx was expected to come from this crushed sector...
- Welcome to the recovery:
- Oil Extends Retreat With European Stocks as Dollar Gains (BBG)
- California police, protesters clash again after 'chokehold' death (Reuters)
- Ruble’s Rout Is Tale of Failed Threats, Missteps (BBG), not to be confused with "Yen's Rout Is Tale Of Keynesian Success, Prosperity"
- Uber banned from operating in Indian capital after driver rape (Reuters)
52-year-old Belgian Geert Tack - a private banker for ING who managed portfolios for wealthy individuals - was described as 'impeccable', 'sporty', 'cared-for', and 'successful' and so as Vermist reports, after disappearing a month ago, the appearance of his body off the coast of Ostend is surrpunded by riddles...
Who says macroprudential regulation doesn't work: according to the BIS, notional amounts of outstanding OTC derivatives contracts fell by 3% to "only"
$691 trillion at end-June 2014. This is also roughly equal to the total derivative notional outstanding just before the Lehman collapse, when global central banks volunteered taxpayers to pump a few trillion in capital to meet global variation margin calls. Clearly the system, in the immortal words of Jim Cramer, is "fine."
- JP Morgan 200K
- Goldman Sachs 220K
- Citigroup 225K
- HSBC 230K
- UBS 230K
- Credit Suisse 235K
- Morgan Stanley 235K
- Deutsche Bank 250K